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China’s adapted Android could soon be coming to a smartphone near you

For a long time, China’s mobile manufacturing sector went unnoticed by the majority of the world. Aside from a couple of internationally-minded companies like Huawei and ZTE, the vast majority were content to focus on the domestic market. But during the past couple of years we’ve seen a few attempts by some of them to broaden their reach and appeal to an international market.

The latest company trying to achieve Chinese escape velocity is Xiaomi, which manufactures low-cost handsets and also develops software. Xiaomi’s cheapest handset costs about $135 in China, whereas the iPhone will set locals back $750.

Xiaomi sold 7 million phones in 2012 and 18.7 million last year. CEO Lei June sent an internal email to his staff this week, confirming the 18.7m handset sales and annual revenues of 31.6 billion yuan ($5.2 billion). In the email, he said his first task was to increase production capacity, so that they can supply “at least 40 million mobile phones this year to all users”.

Lei Jun is being cleverly positioned as China’s answer to Steve Jobs; he’s already a billionaire and media favourite, with a preference for jeans and dark shirts. But it’s one thing to copy Apple’s late founder and its products, it’s quite another to display the same sort of innovation and marketing genius. The odds are stacked heavily against him.

Its latest smartphone, the Mi3 W-CDMA, runs on a Qualcomm Snapdragon 2.3GHz quad-core processor, features a 5-inch 1920x1080 HD display with 441ppi, has a 13MP camera, and is housed in an 8.1mm deep magnesium alloy case. It runs Miui v5 – its own variant of Android – that the company claims has 20 million users, and syncs to the firm’s own cloud service.

Miui is an Android ‘skin’ and ecosystem that comes pre-installed on all of its handsets and is available as a download. The company claims there are 30 million users of its software, which only launched in 2010. If you add the two years sales figures together, you get 25.7 million, leaving a further 4.3 million who have most likely downloaded the software onto other open Android handsets.

According to Xiaomi, the Miui ecosystem generates over $4.9 million in monthly revenue from its app store and products like UI themes. That’s a healthy amount of money, although to put it into perspective, Google Play generated $12m a day from the top 200 apps in its store in November, with Apple at $18m (according to Distimo).

The firm has released an infographic (there’s an English version here, courtesy of Techinasia) to support its claims of being a serious contender in the mobile sector. The headline-grabbing statistic, which has been picked up already by a few business news sites, is that the company already has Miui users in 58 countries. On the face of it, that’s impressive, but there’s no data to support just how many users are active in the 57 countries not called China.

Its market share in recent quarters in China has remained at around the 5 per cent mark – well below market leader Samsung, but rivalling Apple. According to ABI Research, Xiaomi had a 0.9 per cent global market share in Q2 last year, with 3.8m sales. Not much when compared with Samsung’s 27.3 per cent, but it’s slightly higher than Motorola’s 0.8 per cent, and less than a half of what HTC and BlackBerry sell. The largest China-based manufacturer (ZTE) is only recording 3.6 per cent.

“The OEM has a unique sales strategy, whereby 80 per cent of its devices are sold through its online channels saving money on retail locations,” said ABI Research’s Michael Morgan. “The Mi2 handset sold over 7 million units in the 1H 2013, making it the best-selling handset model in China, beating out the Samsung S4 and the iPhone. The Mi2S follow up device launched in April has specs that are competitive with the Galaxy S4, but at half the price, it is no surprise why these ‘millet’ phones are so popular in China.”

The privately-owned Xiaomi is backed by, amongst others, the local venture capital offshoot of Qualcomm and Yuri Milner’s Digital Sky Technologies VC fund. It is already believed to be worth in excess of $5 billion.

Last September, Xiaomi hired former Google exec Hugo Barra to oversee its international expansion plans. Its first foray overseas will be to target Southeast Asia within the next few months, establishing offices in Singapore and Malaysia.

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